The Administration strongly opposes H.R. 1402 because the bill would
prevent the Department of Agriculture from proceeding with reforms that
would modernize the federal milk marketing order system. If H.R. 1402 is
presented to the President, the Secretary of Agriculture will recommend
that he veto the bill.

The 1996 Federal Agriculture Improvement and Reform Act directed the
Secretary of Agriculture to consolidate the 31 federal milk marketing
orders that, in part, establish the method by which minimum prices are
established for fluid milk in different regions of the country. In
addition, the 1996 Act authorized the Secretary to review the differentials
-- the amount added to the price of milk in a given region -- and the
resulting minimum prices processors pay dairy farmers. Based on
information gathered from hundreds of meetings, comments on several
reports, and thousands of public comments, the Secretary has concluded that
the price structure, as embodied in the Department's final rule, best
reflects the economics of supplying the milk markets.

H.R. 1402, however, would require the Department to impose a price
structure similar to the status quo. Such a price structure will stimulate
excessive milk production, reduce fluid milk consumption, and depress
prices for milk used in manufactured dairy products. The bill will saddle
dairy farmers, processors, and consumers with a system that has prompted
virtually everyone to call for the very modernizations that the Department
has already developed for the federal milk marketing order system.

While the federal milk order provisions of H.R. 1402 have been justified as
an effort to support the incomes of dairy farmers, the federal milk order
program cannot substitute for a meaningful national safety net for dairy
farmers. The most effective and modernized milk marketing order system,
such as the one the Department has adopted, ensures the orderly and
efficient movement of milk to supply fluid markets. In addition, the
Administration stands ready to work with Congress to develop sound,
effective assistance for dairy farmers.

Finally, H.R. 1402 contains provisions that would extend the dairy price
support program for one year. The Administration supports an extension.
This is particularly urgent since the 1996 Act, in marked departure from
how other major commodities are treated, ends the dairy price support
program two years before the rest of the programs expire.

Pay-As-You-Go Scoring

H.R. 1402 would affect direct spending and, therefore, is subject to the
pay-as-you-go requirement of the Omnibus Budget Reconciliation Act of 1990.
OMB's preliminary scoring estimates are presented in the table below.
Final scoring of this legislation may deviate from this estimate.